In the letter, shared on Twitter by Capital Asset Management chief executive officer Alan Smith, Pension Bee said: “With some providers, some older pensions may have exit fees or special benefits, such as guaranteed annuity rates and protected tax free cash.
"In general, these occur in less than 2 per cent of pensions and exit fees for over 55s are capped at 1 per cent of the pension value. We give customers the option to waive checking for exit fees and valuable benefits.
“This means that we won’t check with your provider on either of these things, which can also help to speed things up.”
The uproar on Twitter began shortly after Smith tweeted a snapshot of the letter, with many stating their surprise at PensionBee’s offering.
Smith said: “The waiver form sent to clients is borderline unethical, and certainly poor practice that no regulated adviser could get away with.
“There are some extremely valuable benefits built into some older pension plans and clients will lose them on transferring their funds – they can be quite complex to understand and therefore many people could do it unknowingly.”
He argued that in certain circumstances the costs could run into tens or even hundreds of thousands of pounds.
“In my opinion, PensionBee should refer any complex transfers to independent, regulated advice professionals,” he said.
Likewise, Co Navigate co-owner and financial planner Jamie Bogle, like many, agreed and some raised queries as to how the Financial Conduct Authority did not act on this.
Bogle said: “I find it astonishing that the regulator would allow this. We go to great lengths to ensure a client isn't missing out on valuable guarantees or being penalised for transferring a pension. This information is often hidden away and not easy to spot unless you know what you're looking for.
“A client might well be comfortable forgoing those guarantees or paying a transfer penalty in the end, but how can you know unless you have an informed conversation with them? To be able to offer speed as a benefit to the client is dangerous and irresponsible.”
'Highly irresponsible'
Meanwhile, Open Money founder Anthony Morrow said pension consolidation has been a significant market for asset accumulators especially in the do-it-yourself space.
“PensionBee is clearly the most successful of the various entrants over recent years but by no means the only one,” he said. “I've long believed that the idea of 'all pots in one place' and a 'shiny app' are not good enough reasons to transfer your pension.
“In fact it is reminiscent of the problems in defined benefit pension transfers where common reasons were "investment choice" and "flexibility".
“This swerving of looking at major benefits is shocking.”
Planworks owner Nathan Fryer said it is “highly irresponsible” given that some of these features of older style pensions can be quite significant.
“I am working on a case this week where the pension is offering a guaranteed income in retirement (via a guaranteed annuity rate ) of £38,557 per year whereas the open market is only offering £22,019,” he said.
“Protected tax-free cash can be as much as 100 per cent of the pension. To suggest that a client simply waive the right to have this checked to speed things up is quite frankly irresponsible and should be investigated by the FCA.”
Fryer said the majority of people have not saved enough for retirement and the general public are unfortunately not aware of the benefits that these valuable features can have on a person's retirement outcome.
“Advisers are not allowed to do this and nor should providers as a way of simply attracting assets,” he added.
PensionBee chief executive officer Romi Savova, said: “At PensionBee we take people's pensions very seriously. Our default approach is to check old pensions for exit fees and special benefits prior to transfer, however, we have had feedback from customers that they have already done these and do not wish for us to check.
"Therefore, for low risk pension providers where our customer has provided the policy number and therefore has had the ability to check for exit fees or special benefits themselves, we allow the customer to opt out of our checking process. We appreciate that it is not clear from the welcome email that this option is only available to those customers and we are happy to add this to the email.”
sonia.rach@ft.com
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